An independent review into Yankuang Energy’s potential $1.8 billion takeover bid of Yancoal has deemed it unreasonable in its current form.
Yankuang Energy, a major shareholder of Yancoal, filed documents with the Hong Kong stock exchange in late May suggesting it was considering a $US3.60 ($5.01) per share bid to acquire the remaining stake in the coal miner.
This was to be satisfied through the issuance of convertible bonds and would potentially result in Yancoal’s delisting from the Hong Kong stock exchange and/or the ASX.
But the independent board committee (IBC), which Yancoal appointed in the wake of the bid, has indicated the transaction would not be in the best interests of the company’s minority shareholders.
The IBC comprises all non-executive directors who do not have any direct or indirect interest in the potential transaction, other than as a Yancoal shareholder.
During the evaluation process, the committee took advice from Gilbert + Tobin as an Australian legal adviser, Freshfields Bruckhaus Deringer as a Hong Kong legal adviser, and Deloitte Corporate Finance as strategic and commercial adviser.
Yancoal said initial concerns stemmed from Yankuang Energy’s valuation being a discount to the prevailing trading prices on the ASX and the Hong Kong stock exchange.
The $US3.60-per-share bid reflected a 14.49 per cent discount to Yancoal’s last closing price of $HK33.05 ($US4.21) on the Hong Kong stock exchange on May 25.
Yancoal reaffirmed that its shareholders should not take any action regarding Yankuang Energy’s potential bid.
“There is no certainty that the potential transaction will proceed, materialise or be consummated,” Yancoal said in a statement. “Yancoal shareholders and potential investors are therefore advised to exercise caution when dealing in the shares and/or other securities of Yancoal.”
As of June 7, Yancoal was trading at $HK29.50 on the Hong Kong stock exchange and $5.43 on the ASX.